Rental Arbitrage – When done right, short term vacation rentals will generally generate more returns than long term rentals.
With the increasing popularity of short term rental companies, the short term rental business is experiencing rapid growth.
The short term rental business is highly lucrative but how does one get into it without a reasonable capital to buy a short term rental property.
You can make money on Airbnb without buying a property. You can get started with minimal start-up capital and very low risk through a business model called Rental Arbitrage.
With the demand for housing rising very fast, it is more difficult for an average person to own a house now but short-term rental got you covered even if you have no money to own a property.
What is Rental Arbitrage?
Rental Arbitrage is a practice of renting a property long term and listing it on a short term rental platform like Airbnb.
Benefits of Rental Arbitrage
1. Lower start-up Capital
It allows you to become a host without owning a property. You simply sign a long-term lease, re-rent the property on Airbnb and collect the difference.
If the difference between your Airbnb income and your monthly rent is significant enough, you can generate positive cash flow. If the property is not favorable, you can leave it and go for another one.
3. You can scale faster
With the rental Arbitrage model, you can rent out a handful of properties for what you would have used to purchase only one rental property. As a result of this, you will make a lot of money.
How to start a Rental Arbitrage Business
Starting a rental Arbitrage is really very easy but you need to make the right decisions in order to be successful in it and make a lot of money from it. Here is how it works
#1. Conduct Airbnb Market Research
Your degree of success in your Airbnb is totally dependent on your location. To make sure that you are investing in areas with high-income potential, you need to do a thorough Airbnb Market Research.
#2. Find profitable properties for Rental Arbitrage
Once you know your target market, you should identity rental properties that will bring you the most success. Find a short term rental property that will allow you to make the most money.
To find the most profitable properties in any market in the US you can use Mashvisor`s Airbnb profitability calculator to do a quick Airbnb analysis.
#3. Talk to your potential Landlord about hosting on Airbnb
While Rental Arbitrage is completely legal, do well to ensure your potential Landlord about your plans before you proceed to sign the lease agreement.
This will make sure you are on the same page so that you don`t end up breaking the lease agreement. If they agree, set hosting lines for both of you and put them into writing, this will show how responsible you are.
#4. List your property on Airbnb
List your property on Airbnb and optimize it for better visibility. Be sure to take professional photographs that will show your rental property in the best way possible.
Your listing description should be detailed and highly the best features of your property.
#5. Automate your Business
Managing a short term rental property is a lot of work and can be time-consuming. You should use property management software to automate your business. Automation will help your business run smoothly, enhance the guest experience, and maximize your revenue.
#6. Grow your Rental Arbitrage Business
When your property begins to bring in income, be sure to save. By following the same business model, you can leverage the profits to add another property to your portfolio in just a few months. If you do it right, you will be able to continue subletting properties and grow your business exponentially.